Entrepreneurial Tax Advice

TAX INCENTIVES FOR ENTREPRENEURS’

Entrepreneurs’ Relief (ER) is a particularly attractive tax relief. Entrepreneurs’ Relief reduces the amount of Capital Gains Tax (CGT) on a disposal of qualifying business assets on or after 6 April 2008, allowing relief up to a maximum of £10m. However, there are strict conditions regarding who can qualify for ER and when claims can be made.  

ER is generally aimed at individuals and is not available for companies, and the qualifying period is two years, up until when you disposed of the asset or an interest in the asset, or when the business ceased. The assets themselves must qualify too. Given the complexity of all the stipulations, we recommend you talk to us before making any decisions. 

TAX EFFICIENT STRUCTURING

Ensuring your investment is structured correctly will give the most favourable tax results. Government backed incentives such as Seed Enterprise Investment Relief (SEIS) and Enterprise Investment Relief (EIS) can deliver generous tax breaks. 

Seed EIS, designed for early-stage companies, offers an attractive 50% income tax relief, but the risks of investing in an embryonic company should be considered. EIS is aimed at established companies and people with more to invest. Investors benefit from a 30% income tax reduction based on the amount invested, any gains on disposal of qualifying EIS shares are free of capital gains tax and there’s loss relief if an EIS investment fails.  

The qualifying conditions for both SEIS and EIS are notoriously complex, but we can advise on whether an investment opportunity meets those conditions and that you’ll benefit from these valuable tax reliefs. 

EMPLOYEE INCENTIVES

A successful investment requires a motivated management team; implementing the most appropriate employee share incentive plan is fundamental to achieving this. 

Enterprise Management Incentive (EMI) share schemes offer tax benefits that are very effective at incentivising employees. They are designed for SMEs, who also enjoy tax benefits. Employees are granted an option (or right) to acquire shares in the future, at today’s value. They’ll only pay income tax at exercise on the value of the shares when they were awarded, and the shares will be subject to a lower rate of CGT. of just 10%. Subject to certain conditions, there’s also no tax or NIC cost for employers, and they can benefit from corporation tax relief on employees’ sales of shares. 

PRE-EXIT WEALTH & ESTATE PLANNING

With the advice of our specialist advisors, planning for an exit can ensure you minimise your exposure to Capital Gains Tax (CGT) and effectively mitigate Inheritance Tax (IHT). 

If you’re considering making a risk-based investment in a trading company, we’ll determine the optimal structure and tax reliefs available. For example, we’ll ensure the availability of Entrepreneurs’ Relief (ER), so that only 10% CGT is paid on any gains when the company is sold. We’ll also advise you on the most tax-efficient way to invest those proceeds, in areas such as pensions. 

Minimising IHT is best achieved by planning before the sale of the business, rather than after it. We’ll advise on this, and other aspects such as trusts, to ensure you realise the greatest possible value both for you and, if applicable, for  future generations.